USKIP; investors to move investments overseas
Elliott believes UKIP gains at the general election in May could hurt international confidence in the UK, and he advises sterling-based investors to consider increasing their exposure to overseas markets.
“UKIP poll gains may translate into a role in a Conservative-led coalition government,” Elliott said. “This in turn makes a referendum on the UK’s membership of the EU more likely, introducing considerable uncertainty into the economy.”
Elliot also believes that UKIP successes will place pressure on sterling, equities and gilts, “at a time when structural problems in the UK risk being exposed by higher global borrowing costs.”
“Economic pain can be expected to start long before the referendum itself, with private sector investment falling due to the uncertainty caused by the upcoming vote,” he continued. “Why would, say, a Japanese car producer continue with plans to expand production if they do not know the future terms of access to the EU market for cars?”
“In the 18 months prior to Scotland’s independence referendum last September, new private sector residential building collapsed on account of the uncertainty created by the poll. This is likely to be replicated nationwide.”
“Investors in UK assets can respond to the uncertainties posed by UKIP by removing their wealth from the UK,” Elliott concluded. “Many UK investors should be doing this anyway. UKIP success in the polls may be a good excuse to start that much-needed rebalancing in favour of global stocks, bonds and perhaps property.”